FIT deadlines cause installations to spike, but favorable investment conditions will linger
Strengthening conditions in the global Photovoltaic (PV) market in late 2009 are carrying over into 2010, prompting iSuppli Corp. to dramatically raise its forecast for solar installations to 13.6 Gigawatts (GW) this year.
This represents a substantial upgrade from iSuppli’s previous forecast of 8.3GW in 2010. The new forecast calls for annual growth of 92.9 percent. By 2011, global PV installations will nearly triple to 20.3GW, up from 7.0GW in 2009.
This will be an up and down year for PV installations. The first quarter of 2010 was negatively affected by winter conditions, likely causing a decline in installations compared to the fourth quarter of 2009. However, the second quarter is expected to be a blockbuster for the global PV industry. Reduced Feed-in-Tariffs (FIT) in Germany are coming in July and consumers in that country will rush to install PV systems before that occurs. A market correction will then happen in the third quarter, leading to a huge fourth quarter due to the approach of other countries’ FIT deadlines in January 2011.
The main driver of growth in the second half of the year will the perseveration of a favorable Return on Investment (ROI) for homeowners and project developers. The ROI in the second half of 2010 will reflect system price declines that compensate for the FIT reductions. In some cases, the ROI will remain higher than 10 percent. These declines will be enabled by plummeting prices for solar modules during 2009 that are just now being reflected in system prices.
Needless to say, these quarterly ups and downs will result in a difficult year for the PV supply chain and production planners as they struggle to figure out how much is needed, where it is needed and when is it needed.
With the 2010 forecast for PV installations having been upped for 2010 to 13.6GW, there could be material supply constraints during the year. Spot shortages of inverters, and perhaps modules, could curtail the growth.
There could also be an installation bandwidth problem as there may not be enough trained crews to handle the amount of installations that are demanded.
Looking ahead to 2011, there could be even more supply constraints. Based on iSuppli’s analysis of capacity announcements, unless additional expansions take place, crystalline-Silicon (c-Si) modules could encounter constraints in 2011. iSuppli believes that utilization rates for c-Si module production facilities will climb to more than 90 percent in 2010. Furthermore, many Tier 1 suppliers of c-Si modules and cells will be sold out. Tier 2 and Tier 3 module suppliers now are seeing business pick up as they strive to supply Germany with the modules it needs.